Near-bankrupt Vinashin may owe 3% of Vietnamese banks’ loans

Vietnam Shipbuilding Industry Group, the near-bankrupt ship maker, may account for as much as 3 percent of some Vietnamese banks’ loan portfolios, putting them at risk for restructuring, Moody’s Investors Service said.

Vietnam Shipbuilding Industry Group, the near-bankrupt ship maker, may account for as much as 3 percent of some Vietnamese banks’ loan portfolios, putting them at risk for restructuring, Moody’s Investors Service said.

State-owned Vietnam Shipbuilding, also known as Vinashin, said Nov. 19 it may delay a $60 million principal payment on a $600 million loan, according to Karolyn Seet, a Singapore-based financial institutions analyst at Moody’s, who wrote she now questions the extent of government backing for the company.

Long-term delays in debt repayment and a lack of government support could force banks to restructure loans to Vinashin or write off their debt and damage their capital, she said in a note today. The company had accumulated total debt of about 86 trillion dong ($4.41 billion) as of June, the government said in August.

“Before this, we thought the government would be willing to step in and bail out any bank in time of default,” she said in a telephone interview. “With this case coming along we are not sure if the support is as high as we originally thought.”

Vinashin has 16.2 trillion dong of bonds and loans maturing through 2017, according to data compiled by Bloomberg. The yield on its 9 percent dong-denominated notes due in April 2017 rose to 21.16 percent today, the highest in at least a year, according to Deutsche Bank Vietnam prices.

For some Vietnamese lenders, especially the state-owned commercial banks, Vinashin is their largest debt concentration, Seet wrote. Most of those loans have not been written off and are still categorized as performing or “special-mention loans.”

Management Ousted

Prime Minister Nguyen Tan Dung replaced the company’s top management and began a probe of its operations. The government also announced a restructuring of the group.

Vinashin will do the restructuring on its own, Chief Executive Officer Nguyen Ngoc Su said by telephone today, giving no timeframe. He denied earlier reports that KPMG is being hired as an adviser on the restructuring.

Vinashin used resources obtained from government guarantees to invest in non-core activities, falsified financial reports and is on the verge of default, the World Bank said in October.

The company will now focus on shipbuilding and repair and other related businesses, Moody’s said.

“The Vinashin episode shows that timely government support to both the corporate as well as banking sectors cannot be reliably assumed,” Seet wrote. “More importantly, the episode raises further questions about the risk of further credit losses in loans to Vietnam’s state-owned enterprise sector.”

Vietnam’s banking industry may have an overall loan exposure to state-owned companies of as much as 40 percent, according to Moody’s.

In its Asian Development Outlook 2011 Update (ADO Update), the ADB said Resolution 11, a comprehensive policy package, has made good initial progress by helping the exchange rate to stabilise, allowing foreign reserves to be replenished, and lowering monthly inflation outcomes during June &ndash; August.

&ldquo;VietinBank has made a good choice of advisers,&rdquo; said Alan Pham, chief economist at VinaCapital Investment Management Ltd. HSBC has a depth of expertise and wide distribution network globally that will help get the Hanoi-based bank a &ldquo;good rate,&rdquo; he said.

Last week, the central bank decided to increase the reserve requirement ratio by 1 per cent to 8 per cent for foreign currency deposits less than 12 months and to 6 per cent for foreign currency deposits over 12 months.

The Vietnamese authorities deserve our applause for facing up to tough economic issues. Today&rsquo;s rate hike was just another step in the long battle against inflation. Although the policy stance has clearly shifted from boosting growth to improving economic stability since February, the data flow remains challenging.

According to IMF&rsquo;s regional economic outlook, Vietnam has overcome the global crisis thanks to the substantial financial stimulus package worth 5 percent of its GDP and monetary easing policies. The IMF commented that Vietnam is of the fastest growing economies in Asia. In 2010, Vietnam posted a growth of 6.8 percent thanks to demand for both domestic and international growth. However, the expansion policy adopted during the crisis also has increased macroeconomic risks.

The State Bank of Vietnam set a ceiling on dollar deposit rates on April 13, restricting interest payments for individuals to 3 percent and those for non-credit institutions to 1 percent. Holdings of dong can attract returns of as much as 14 percent.

&ldquo;There is a big difference between what the regulations state and their actual implementation, hindering investors&rsquo; plans,&rdquo; Han Jae Jin, chairman of the Korean Chamber of Commerce&rsquo;s foreign affairs board, said.

Arepresentative from Amcham, said at the workshop on the investment environment improvement workshop held in HCM City on April 26, that enterprises not only have to spend money, but also a lot of time to fulfill customs procedures. It takes exporters three or four days on average to get customs clearance. Especially, it would be a big trouble to enterprises, if they export perishable products and they have to wait for customs procedures.

&ldquo;We believe the Vinashin episode shows that timely government support to both the corporate as well as the banking sectors cannot be reliably assumed,&rdquo; Karolyn Seet, an analyst at Moody&rsquo;s wrote in the company&rsquo;s weekly credit outlook. &ldquo;More importantly, the episode raises further questions about the risk of further credit losses in loans to Vietnam&rsquo;s SOE [state-owned enterprise] sector.&rdquo; Vinacomin, a state-owned coal miner, pulled a proposed $500m bond issue last week because of investor jitters, which have been exacerbated by the ongoing eurozone debt crisis.

Talking about whether there would be any changes in banking operations in Vietnam after banks with 100% foreign capital such as Standard Chartered Vietnam are allowed to operate all banking business as Vietnamese banks from January 1, 2011, Taylor said since the transformation process from foreign bank branch into banks with 100% foreign capital has been done smoothly, he thought there would be no sudden change on January 1, 2011.

Duc Hanh examines what the attractions are for investors and owners. Typically condotels are high-rise buildings in either major cities or holiday destinations. Owners can enjoy the benefits of the hotel chain&rsquo;s marketing campaigns to lure in renters and trust the management to ensure a comfortable stay.

According to Vietnam Banking Association (VNBA), dong deposit rates in 2010 are significantly higher than 11 percent per year for all maturities. Currently, although deposit rates are listed at 12 percent by most of the banks, in fact, depositors can always negotiate with banks to receive higher interest rates up to 14 percent per year.

The government has announced a slew of new policies in recent weeks in an effort to ease pressure on the dong, including raising interest rates on dong-denominated loans by 1 percentage point to 9 percent; proposing a 20 percent tax on gold exports; allowing commercial banks to import gold; and pushing companies to curb imports of some products to try to narrow the trade deficit.

Pho was created in North Vietnam, and Turtle Tower&rsquo;s soups stick to the original style: they are served with green chilies and limes, but without the bean sprouts, basil and hoisin sauce that were added when the soup migrated south in the 1950s.

Washington has often voiced its concern over human rights issues in Vietnam, and the latest actions drew sharp criticism from some members of Congress as well as a statement from the United States Embassy in Hanoi urging their release.

In 2011, the country attracted $14.7 billion in FDI, equal to 74 per cent of 2010. Over $11.5 billion came from 1,091 newly-licensed projects while the rest was from 374 existing projects that increased their capital.

In January 2011, the government agreed the plan to make privatization for EVNTelecom whereby EVNTelecom will sell a part of state holding to strategic investor and offer preferential shares to the employees. Of which, EVN will hold 50.6% stake, 0.4% stake will be held by the employees and 49% stake for FPT Co and FPT Telecom Joint Stock Co (FPT Telecom).

Hoang Anh Gia Lai Group has become one of the most successful investors in this neighbouring country with the total investment capital of US$1 billion in such areas as rubber, sugar cane, mining and hydropower industries.

The State Securities Commission (SSC) would check DVD auditing files in Ernst &amp; Young in late September, according to SSC&rsquo;s vice chairwoman Vu Thi Kim Lien. The Accounting and Auditing Department and Vietnam Association of Certificated Public Accountants also join the inspection. A&amp;C Auditing &amp; Consulting, which audit the DVD&rsquo;s 2008 financial statement, would be checked as well.

The investment capital of Vietnamese investors exceeded $10.7 billion and chartered capital of Vietnamese investors also reached approximately $10 billion. They mainly invested in mining sector with about $17 billion, of which, Vietnamese investors poured over $4.3 billion and chartered capital of over $3.7 billion.

The Vietnamese insurance market is being competed by both domestic and international insurers and is hurt by economic challenges. Hence, insurers are forecast to face difficulties in funds and premiums. Optimistically, insurers reported revenues growth of 10-15 percent in the first eight months.

The government&rsquo;s Resolution 11 released early this year is a timely response to the double-digit inflation, draining forex reserves and a devaluating local currency, said Tomoyuki Kimura, ADB&rsquo;s country director in Vietnam.

At an earlier working session between the two ministries, the Ministry of Industry and Trade (MoIT) requested the Ministry of Finance (MoF) to hike import tariffs on NPK fertiliser from the current 6 per cent to 6.5 per cent; delay imposition of a 3-per-cent export tax on steel ingots and finished steel; and slash the export tax on coal from 20 per cent to 10 per cent.

A recent VASEP conference pointed out that if Vietnam failed to pursue the lawsuit, it could lose the US market to other big exporters like India and Thailand who had won a similar suit, Thanh Nien newspaper said.

In its Asian Development Outlook 2011 Update (ADO Update), the ADB said Resolution 11, a comprehensive policy package, has made good initial progress by helping the exchange rate to stabilise, allowing foreign reserves to be replenished, and lowering monthly inflation outcomes during June &ndash; August.

&ldquo;VietinBank has made a good choice of advisers,&rdquo; said Alan Pham, chief economist at VinaCapital Investment Management Ltd. HSBC has a depth of expertise and wide distribution network globally that will help get the Hanoi-based bank a &ldquo;good rate,&rdquo; he said.

Last week, the central bank decided to increase the reserve requirement ratio by 1 per cent to 8 per cent for foreign currency deposits less than 12 months and to 6 per cent for foreign currency deposits over 12 months.

The Vietnamese authorities deserve our applause for facing up to tough economic issues. Today&rsquo;s rate hike was just another step in the long battle against inflation. Although the policy stance has clearly shifted from boosting growth to improving economic stability since February, the data flow remains challenging.

According to IMF&rsquo;s regional economic outlook, Vietnam has overcome the global crisis thanks to the substantial financial stimulus package worth 5 percent of its GDP and monetary easing policies. The IMF commented that Vietnam is of the fastest growing economies in Asia. In 2010, Vietnam posted a growth of 6.8 percent thanks to demand for both domestic and international growth. However, the expansion policy adopted during the crisis also has increased macroeconomic risks.

The State Bank of Vietnam set a ceiling on dollar deposit rates on April 13, restricting interest payments for individuals to 3 percent and those for non-credit institutions to 1 percent. Holdings of dong can attract returns of as much as 14 percent.

&ldquo;There is a big difference between what the regulations state and their actual implementation, hindering investors&rsquo; plans,&rdquo; Han Jae Jin, chairman of the Korean Chamber of Commerce&rsquo;s foreign affairs board, said.

Arepresentative from Amcham, said at the workshop on the investment environment improvement workshop held in HCM City on April 26, that enterprises not only have to spend money, but also a lot of time to fulfill customs procedures. It takes exporters three or four days on average to get customs clearance. Especially, it would be a big trouble to enterprises, if they export perishable products and they have to wait for customs procedures.